In my most recent post, I argued that in the United States, career prospects and education have a dubious connection. I did not establish that college degrees never have a high ROI, nor did I say that college is worthless if it fails to provide matriculates with high wages in stable careers.
In fact, I barely mentioned money at all because the post wasn't really about the cost of college at all. Instead, it was about the relationship between college and careers, and the fact that nobody gets to assume career stability anymore.
However, there is currently $1.2 Trillion dollars in outstanding student loan debt, about half of which is in default. On top of this, 2015 college graduates averaged $35K in student loans per person, which could alternatively buy you the house across the street from me. I think it's fair to say we've got a student debt crisis on our hands.
And as a parent of a child who might one day go to college, and as a taxpayer who might have to clean up other people's debt mess, I have a vested interest in resolving the problem before I become a billionaire. From my perspective, these are the most important steps that anyone can take to turn around the debt crisis.
Parents- Engage the education narrative with your kids
If you send your kid to school, or if you let them watch TV or if you let them play on the internet or if you don't live in a bunker, then your kid is likely to hear something that I call the education narrative. The education narrative goes like this:
If you work hard in Middle School, you'll be able to join honor's/AP classes in high school, if you take AP classes in high school, you'll be more likely to succeed in college. If you succeed in college, you're likely to live a happy and productive life.
This narrative has never been based on guarantees, but it is a hugely influential story arc in most of American culture. The problem with the story arc is that it leads to a false sense of individualization and a false road to success. Most young people follow the same exact path as their peers, but they feel as if they're doing something unique because they have picked their college, and their major, etc.
As parents, I think the most powerful thing we can do is to flip this narrative on its head. I think we should ask young people, "How do you envision your adult life? What do you think will make you content in the long run? What do you think success means?"
I think instead of asking, "What do you want to be when you grow up?" we should make a point of asking, "Who do you want to be when you grow up? What do you want to define you?"
Do I think an eight year old can give a great answer to these questions? No. I don't. Nor can a seventeen year old, nor can a 27 year old. But at least these are good questions that can lead young people (and old people) to practical choices including whether or not college is going to be a wise course of action.
Yes, I am asking you to ask teenagers to think. I have no doubt that this is difficult, but I trust that most teenagers are capable of it.
By the way, if you're starting these conversations with a teenager, it's likely that they've already bought into the full education narrative, so if you plan to hold a contrarian view of education it's a little bit too late. I plan to start these conversations around age 9 when I can still manipulate my kids (I mean guide them).
Parents and Educators- Contextualize the cost of college
A lot of the narrative I hear surrounding student loans is that 18 year olds are in no way equipped to understand how much money college costs.
That's a bullshit narrative.
18 year olds aren't equipped to understand college costs because nobody takes the time to contextualize the cost for them. But 18 year olds aren't stupid, and they have meaningful money experiences.
By the time I was 18 years old, most of my friends and I earned around $8-$10K per year. We worked 10-20 hours per week earning $10-$30 per hour. We paid for things like gas and car insurance, and we spent or saved our money with some tiny level of intention (though we wasted plenty of money too).
Nobody said to us, "The cost of one year's worth of tuition at the U of M is equivalent to the amount of money that you earned this year." Nobody said, "If you finance 4 years of tuition only, you'll end up with $40K in debt, which will cost you a minimum of $450 per month for ten years."
Nobody asked us to realistically estimate how much we might earn after college, and whether $450/month would be worth it in light of those earnings.
We heard the story called, "go to college and get a job." We assumed that everything would work out. And for those of us with wealthy benefactors, it has worked out very nicely indeed, but many of my friends weren't as lucky as me.
I think many of us fear that contextualizing the cost of college will keep students (especially poor minority students) from obtaining valuable university degrees. This is a reasonable fear, but I believe that everyone who wants to attend college should have the opportunity to understand the financial consequences first. At the very least contextualizing the cost of college will help students become more creative in the way that they pursue higher education.
Do not be the parent or educator that allows the young people who you care for walk blindly into debt because you desperately want them to achieve the success called a Bachelor's degree. If we truly want to help young people succeed, we will help them be open to options outside of college, and we will help them understand what paying for college means.
Let the private sector deal with loan fallout
In 2007, my husband bought a condo at the top of his price range, with a 10% down payment and no credit score. 7 years later, he and I sold it for $40K less than the 2007 purchase price. If my husband hadn't met such a ridiculously good-looking and wealthy young woman, he probably would have had to short sell the condo (if he decided to move).
I tell you this story because I want to make sure that everyone understands that I don't think private banks are particularly awesome at evaluating risk.
Also, for those who have trouble remembering the financial meltdown of 2008/2009, I remind you that only a handful of privately funded bank buyouts happened before the United States Government infused a pile of cash into "Too Big to Fail" banking institutions. I remind you of this, so that you don't accuse me of short-sightedness when it comes to the separation or lack thereof between big finance and government.
Now that I'm done contextualizing the situation, I will tell you that I think that the government should get out of the business of backing student loans. Any sort of funds that would be spent on subsidizing loans should instead go towards subsidizing college directly. Help poor students gain more education by giving them grants, or help all students obtain degrees by lowering the sticker price of public universities (which is the less effective but more politically popular option).
I'm not saying abolish student loans altogether. I'm saying, let's make banks really take on the risk. If 18-22 year olds are really a good credit risk, then banks will lend them money. If they aren't, then universities will be forced to figure out a way to make college more affordable.
This solution tends to disproportionately limit loan access for poor people (especially those with high credit risk parents who can't co-sign loans) which is why I suggested that funds that aren't directed towards backing student loans should go towards need-based grants and general college subsidies.
If we (even begrudgingly) accept the ideal that college education is a blessing for most people, we don't have to accept that the loans required to obtain the education are a blessing too. I would much prefer that we focus our energy and taxpayer funds on closing the gap between sticker prices and what a student can afford on their own than assuming that loans are a great solution for the least wealthy segment of society.
What do you think should be done about student loans?
I'm a wife, a mom, an employee, and a personal finance nerd who is devoted to spreadsheeting my way through life.